Logistics firm expanding, moving to the Loop

A few months after its largest tenant walked out, the owner of a landmark Loop office building has landed a deal with a new company that bucks a pair of trends in the battered downtown office market.

Total Quality Logistics has signed a five-year lease for 36,322 square feet at 125 S. Clark St., according to a statement from real estate services firm Transwestern, which oversees leasing in the 20-story building. The move is an expansion by the third-party logistics company, which will relocate from roughly 31,000 square feet it occupies now in the West Loop at 328 S. Jefferson St.

The deal stands out as a rare addition of workspace at a time when many companies are cutting back on it, given the rise of remote work following the COVID-19 pandemic. TQL is also going against the grain by relocating from the trendy West Loop office submarket to the heart of the Loop, which has seen a slew of companies decamp from older buildings in favor of newer office properties elsewhere in the city.

The leasing victory comes at a critical moment for the owner of 125 S. Clark St., a venture of German real estate investor Commerz Real AG. Co-working provider WeWork was the largest tenant in the building — which is now dubbed the National — but recently shuttered its four-floor, 112,000-square-foot location at the top of the property. Commerz Real filed an eviction lawsuit earlier this year against the shared office giant to formally retake possession of the space. The landlord also is seeking unpaid rent from WeWork, which had a lease in the building running through late 2033, according to federal court records.

With TQL on board, the building is now 69% leased, according to Transwestern. That’s down from 88% when Commerz Real bought the building in 2018 — mostly a result of WeWork’s exit — and slightly below the 74% average for office buildings in the Loop midway through the year, according to data from brokerage CBRE.

“No other building in the Central Loop is attracting and retaining tenants like The National,” Transwestern Executive Vice President Eric Myers said in the statement. “Even in a struggling market, this building continues to get deals done partly due to its unmatched amenities and competitive pricing. These advantages set The National apart from other buildings in the Central Loop, allowing it to close large new deals that other buildings in the submarket simply cannot match.”

Working in Commerz Real’s favor is that it has no debt on the Clark Street property. Many landlords are trying to find new tenants while they face imminent deadlines to pay off maturing debt, which some are struggling to do after a jump in interest rates over the past year. That has set off a wave of distressed properties in the city, while buildings that are owned free and clear by their landlords might be more flexible with lease terms to help get a deal done.

It’s unclear what prompted TQL to expand and move to the Loop, and a spokesman for the company did not respond to a request for comment. But third-party logistics providers have been a bright spot in an otherwise dreary downtown office market since 2020. Buoyed by demand for their services from companies trying to bolster their supply chains, tenants including Spot Logistics, Traffic Tech, Loadsmart and MoLo Solutions have belied the broader market by expanding their office space downtown over the past three years.

TQL’s departure from its current office sets up a leasing challenge for the venture of Chicago-based Blue Star Properties that owns the 10-story building on Jefferson Street. The logistics firm is the largest tenant in the building, which is 76% leased, according to real estate information company CoStar Group.

It’s perhaps a bittersweet loss for Blue Star, which helped transform 125 S. Clark from an outdated property into one of the most competitive office buildings in the Loop. The developer, which is led by Sterling Bay co-founder Craig Golden, ultimately sold the property to Commerz Real for almost $197 million, a sum that dwarfed the total investment that Blue Star and its joint venture partner, Wolcott Group, had put into the building.

A spokesman for Blue Star did not immediately respond to a request for comment.

Myers, Kathleen Bertrand and John Nelson of Transwestern negotiated the TQL lease on behalf of Commerz Real. CBRE brokers Jon Milonas and James Otto represented TQL.